Are people really our greatest asset? What will it take to move HR from being a cost center to a strategic asset?

For decades, HR has been viewed as little more than a cost center. Businesses are constantly spending on annual budgets, compliance, payroll, hiring, training and the list goes on. It’s no wonder that attitude persists.

Unfortunately, it will be extremely difficult for an HR department to become a profit center because they simply don’t generate revenue. That being said, they can become a profit center for internal clients. By introducing ways to reduce spending, retain top talent, and provide better training, HR can demonstrate to the business purse strings (the CFO and financial departments) how they can act as a profit center and contribute to the bottom line.

The key for a strategic HR professional is to carefully assess current programs and evaluate the need for efficiency improvement. This can happen by reducing or removing old programs and procedures that have outlived their usefulness. These evaluations can also identify where dollars on hiring and training most closely align with the strategic goals of the business.

Focus on Expense Reduction and Creating Efficiencies

Too often, employee programs are outdated and not focused on current business goals and objectives. HR departments must make common practice to review all programs annually. By creating more efficient programs, HR departments may even be able to reduce actual headcount costs. For example, if by implementing a more streamlined processes for payroll, applicant tracking, document management, and training, HR can eliminate some HR department positions and free staff to spend time on more strategic initiatives.

A critical proficiency that is often overlooked by HR departments are solid negotiation skills. Frequently, HR departments increase overhead by paying too much for supplies, software, and programs. Instead, when HR becomes part of the business strategy, the department can focus on negotiating the best price and implementation fees. A good example of paying too much, involves recruitment outsourcing. While average markup fees are more than 30 percent, there are many agencies that will source top quality candidates for less than 20 percent. Another example involves HRIS systems. These systems are frequently robust and can make a big impact on productivity. However, many are not being monitored and used to maximum potential. To ensure they aren’t paying for more than what they need, HR leaders need to fully understand the systems.

Create an Effective Employee Life Cycle Program

Most people outside HR don’t realize how important it is to maintain an effective and efficient employee life cycle. Having innovative solutions can go a long way. From the moment a prospective employee applies for a job to when they ultimately leave the company, HR professionals need to ensure they are doing everything in their power to create a program to promote a strong culture. That includes ensuring people are in the right roles and being trained and developed effectively.

Although HR may never become an actual revenue generator, they can become a cost-savings center. While businesses are spending money on product development and innovation, it is critical for strategic HR professionals to educate business leaders on how they can save the company money by investing in their most valuable asset—their people. Finally, by developing a strong company environment where people thrive, businesses will see a huge return on their investment and the bottom line.

Michael Miles